Sorry, Clients, Here's Why We Bet $700 Million On Madoff

In the letter below, Switzerland’s Union Bancaire Privee explains to clients why it blew $700 million of their money on Bernie Madoff. Click the “full-screen” icon in the lower righthand corner of the player to make it easier to read.

Several interesting points:

UPB says one of its Madoff funds got DAILY trade tickets from Madoff. If so, this meant that Madoff was constructing the fraud on a daily basis instead of a monthly basis, as some have assumed. This must have been time-consuming. It also almost ensures that others were involved. (Bernie Madoff did this himself every afternoon? Please.)

The SEC blessed Madoff’s strip-mall auditor, Friehling & Horowitz, year after year, despite David Friehling, the only non-retired CPA in the three-person shop, telling the CPA people each year he wasn’t conducting audits.

Like Thierry de La Villehuchet and other Madoff observers, UBP “was assured” that Madoff’s broker-dealer arm helped his minute-to-minute market-timing ability. This makes it all the more notable that the largest Madoff feeder, Fairfield Greenwich, never mentioned this (in the documents that we have seen). Was this because using material non-public market information to make money for clients sounds shady, and FGG didn’t want to sound shady–even though this was obviously a critical investment point for many Madoff investors?

Like Fairfield Greenwich, UBP notes that market timing played a key role in Madoff’s returns. And like Fairfield Greenwich, UBP offers no explanation of how Madoff was so adept at this timing when so few other managers are.